Washington, D.C. – The U.S. labor market is showing clear signs of deceleration as corporate profitability declines, trade policy uncertainty escalates, and businesses face mounting operational costs. According to the latest estimates from Bloomberg, job growth is softening significantly, raising concerns about the broader health of the U.S. economy.
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| Photographer: Ting Shen/Bloomberg via Getty Images |
In May 2025, American employers are expected to have added approximately 125,000 jobs, down from a monthly average of 162,000 new positions recorded over the past quarter. The national unemployment rate is projected to remain steady at 4.2%, suggesting a stable but slowing employment environment.
“Our forecast for May nonfarm payrolls ranges between 60,000 and 130,000, with the most likely outcome near 90,000—well below the consensus of 130,000,” stated Bloomberg economists Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou, and Chris G. Collins.
According to the analysts, job creation in the leisure and hospitality industry—one of the largest sources of post-pandemic recovery—has weakened sharply due to declining international tourism and cuts in government-related travel.
Corporate Profits Hit by Rising Costs and Tariff Tensions
Data from the U.S. Commerce Department shows corporate profits tumbled by $118.1 billion in Q1 2025, marking the steepest quarterly drop since early 2020. Analysts attribute much of this downturn to rising input costs, primarily driven by President Donald Trump’s intensified trade tariffs.
On May 30, Trump announced a significant hike in tariffs on steel and aluminum imports, increasing them from 25% to 50%. The administration argues the move is necessary to curb the trade deficit and boost domestic production. However, the European Commission has condemned the action as unfair trade practice and is considering retaliatory tariffs.
“The private sector is seeking consistency, but has instead been met with shifting deadlines and erratic import policies,” Bloomberg noted. “This uncertainty is making businesses hesitant to invest or expand.”
Labor Market Strains: Jobless Claims Continue to Rise
Evidence of a cooling job market is also reflected in recent unemployment insurance data. Initial jobless claims increased by 14,000 to 240,000 for the week ending May 24—exceeding forecasts. Meanwhile, ongoing unemployment claims rose to 1.92 million, the highest level recorded since November 2021, according to Reuters.
This uptick suggests companies are growing cautious, opting to freeze hiring or initiate layoffs to cope with falling revenues and high operating expenses.
Federal Reserve Expected to Hold Steady Amid Mixed Economic Signals
Despite the slowdown, the Federal Reserve has maintained its interest rate policy at 4.25%–4.50% since December 2024. Chair Jerome Powell has reiterated the Fed’s commitment to a “data-driven strategy,” balancing the risks of inflation against concerns over weakening employment trends.
“Fed officials will likely interpret recent labor market data cautiously, as they wait to see how ongoing trade and fiscal developments shape the broader economy,” Bloomberg reported.
Markets are now closely watching for updates from Fed Governors Lisa Cook, Adriana Kugler, and Christopher Waller, as well as the upcoming release of the Federal Reserve’s Beige Book, which offers anecdotal insights from across U.S. districts.
GDP Takes a Hit from Trade-Related Pressures
The U.S. economy contracted by 0.2% in Q1 2025, slightly better than the earlier estimate of -0.3%, according to revised figures from the Commerce Department. The decline was largely due to a 42.6% surge in imports, as businesses rushed to stockpile goods ahead of anticipated tariff hikes.
However, inventory levels and consumer spending failed to rise at the same pace, creating a drag on overall GDP growth.
“Fearing profit erosion, companies are focused on cutting costs—which could translate into a prolonged period of weak job growth,” Bloomberg warned.
Key Takeaways:
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Job creation is losing momentum, with forecasted gains significantly below recent averages.
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Corporate earnings have plummeted, with Q1 seeing the sharpest drop since the 2020 pandemic onset.
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Trump's tariff escalations are raising business costs and shaking investor confidence.
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Rising jobless claims point to growing labor market vulnerability.
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The Fed remains cautious, likely to hold interest rates steady amid economic uncertainty.
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GDP contracted, weighed down by trade-related distortions and weak consumer demand.
